The Lunchtime Byte

06/06/12 -- After an extra two days off, and a trip to see an excellent Elton John in Harrogate last night, getting back into the groove this morning is proving to be something of a challenge. The electronic grains are all green, although it should be noted that corn, wheat and soybean oil have all set, or come very close to, fresh historic lows over the past few sessions.

New crop Dec corn has been hovering only just above the USD5/bu mark, a level it has not breached since late 2010. Jul 12 CBOT wheat, which rallied 16.5% in the week ended 18th May has subsequently given up most of those gains to only stand 2.7% above the lifetime contract low as of last night's close. Meanwhile soyoil closed within 9 cents of setting a new 19-month closing low for a front month on Monday.

In the outside markets, front month Jul 12 NYMEX crude which fell nearly 22% between 1st May and 1st June, currently has recovered a little from its lowest levels since last October to currently stand at around USD85.50/barrel.

The USDA's Moscow attaché says that Russia's wheat harvest this year will total 54 MMT, 2 MMT lower than the official number from Washington last month, although higher than some other estimates kicking around. That would represent a 4% drop on last season's output, hardly a crisis in itself. Of note though is the forecast of total grain exports of 19 MMT of which wheat will account for 16 MMT.

Total Russia grain exports in 2011/12 are expected to be 27.1 MMT, so they are seen falling 30% next season, with wheat shipments declining by 24%. Total Russian grain production in 2012 is estimated at 88 MMT down from 94 MMT last year, a 6% reduction.

Brazilian farmers are already 28% sold on next year's soybean crop even though it doesn't get planted for another four months, according to Celeres. This season's crop is 87% sold, 19 points ahead of the five year average, they add. The firm US dollar and weak real make forward prices more attractive than ever, it seems. No wonder then that plantings are seen increasing sharply for the 2012/13 marketing year, with Informa Economics, Oil World and the USDA all recently forecast that Brazil’s 2012/13 soybean harvest will come in around the 78 MMT mark, some 20% up on this season.

There's a long way to go to that crop though, and pretty much only the US to keep us all going until then.

The ECB have just announced that they've left interest rates on hold at 1%, contrary to a cut of up to 0.5% called for by some. The euro is down on the news.

There's some talk of the Indian government introducing export subsidies to get rid of it's mountain of surplus wheat stocks that has it's antiquated storage system overflowing with state-owned grain. Doing so will cost them a packet, but they may view it that they are better off cutting their losses now whilst these stocks are still of a merchantable quality and make some space with a huge summer rice crop on the way in October.